JEDDAH, Saudi Arabia:A top Saudi energy official expressed serious concern Monday that world oildemand could peak in the next decade and said his country was preparing for thateventuality by diversifying its economic base.

Mohammed al-Sabban, leadclimate talks negotiator, said the country with the world's largest provenreserves of conventional crude is working to become the top exporter of energy,including alternative forms such as solar power.

Saudi Arabia was amongthe most vocal opponents of proposals during the climate change talks inCopenhagen.

And al-Sabban criticized what he described as efforts bydeveloped nations to adopt policies biased against oil producers through theimposition of taxes on refined petroleum products while offering huge subsidiesfor coal - a key industry for the United States.

Al-Sabban said thepotential that world oil demand had peaked, or would peak soon, was an "alarmthat we need to take more seriously" as Saudi charts a course for greatereconomic diversification.

"We cannot stay put and say 'well, this issomething that will happen anyway," al-Sabban said at the Jeddah Economic Forum.

The "world cannot wait for us before we are forced to adapt to thereality of lower and lower oil revenues," he added later.

Some expertshave argued that demand for oil, the chief export for Saudi Arabia and the vastmajority of other Gulf Arab nations, has already peaked.

Others sayconsumption will plateau soon, particularly in developed nations that arepushing for greater reliance on renewable energy sources.

With oildemand only now starting to pick up after it was pummeled by the globalrecession, some analysts say consumers may have learned to live permanently witha lower level of consumption.

The Organization of the PetroleumExporting Countries, as well as other international energy organizations, isforecasting a slight rise in oil demand this year, based mainly on increasedconsumption in Asia after last year's sharp hit.

Either peak oilscenario presents grave challenges for the Gulf region and OPEC, whose countriesrely on oil sales for as much as 90 percent of their budgets.

Al-Sabban,who also serves as the chief economic adviser to Saudi Oil Minister Ali Naimi,said an oil demand peak would be "very serious" for the country.

Saudihas about 264 billion barrels of crude reserves and currently produces about 8million barrels per day out of its overall output capacity of around 12 millionbarrels per day.

The kingdom, widely seen as the de facto leader of the12-member OPEC, has embraced an ambitious expenditure program aimed not only atfurther developing its oil base but also expanding and diversifying its economicbase.

Its expansionary policies came even as other nations weretightening purse strings in response to the world's worst financial crisis inover six decades.

The outlays included billions of dollars for a newresearch university that opened last year, as well as major ventures such as theconstruction of new economic cities and other infrastructure.

Oil'spre-recession price boom also helped pad Saudi Arabia's foreign reserves, now inexcess of $400 billion, and have helped the government weather the worst of theglobal crisis.

International ratings agency Moody's, in a reflection ofthe country's macroeconomic position, on Monday upgraded Saudi Arabia's foreignand local currency government ratings to Aa3 from A1 citing "the continued solidstate of government finances which have largely withstood oil price volatilityand the global economic crisis."

Al-Sabban said that along withinvesting in education and economic diversification, Saudi must ensure that itbecome the top energy exporter, including in solar power, to keep movingforward.

The country recently launched its first solar-powereddesalination plant and al-Sabban said oil giant Saudi Aramco was working on apilot project to inject carbon emissions back into wells to help boost output.

The carbon sequestration project, which he said would be operational by2012, was a sign of Saudi Arabia's commitment to environmentally sound energydevelopment.

The push for cleaner technology is pivotal for the oil richkingdom. - AP